Archives for November 2013

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Capital One 360 has a few Black Friday weekend deals including a $125 bonus for their 360 checking account and $75 bonus for 360 Savings Account. New customers only – you can get one checking bonus and one savings bonus per person. Good from now until Cyber Monday night at 12/2/2013 11:59pm astern. This is usually the biggest bonus they’ll offer all year.

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I have no idea how long this will last, but seller giftcardmall on eBay is offering a $100 Target gift card for $90. Limit 2 per eBay customer. Free shipping of physical gift card. Seems legit to me. I bought two, we’ll see how it goes.

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Get 30% off any one print book with coupon code BOOKDEAL, must be sold and shipped by Amazon.com. Expires December 1, 2013 at 11:59pm PST. Max discount $10. Books can be the gifts with the highest ROI. 😉 Visit this link for more information. Here are my financial book reviews.

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Online stock brokerage firm Capital One Sharebuilder announced a few Black Friday and Cyber Monday promotions this year. Please note the valid dates on the promotional codes below. I’m full of tryptophan so I’m just going to pretty much copy and paste the press release I got. Real-time trades are $6.95, automatic scheduled trades are $4.

New non-IRA Account Bonus with Promo Code BFSB2013

$150 bonus for new customers who open a ShareBuilder account between Nov. 29 and Dec. 2, 2013, and execute at least three trades by Dec. 27, 2013.

The other current promotion is a $100 bonus for $5,000+ deposit with no trade requirement, using promotional code 100LSQ4. Must open account by 12/31/13 and deposit must be completed by 2/14/14.

IRA-only Bonus with Promo Code BFIRA2013
Investors who open a new IRA account between Nov. 29 and Dec. 2, 2013, and fund it (deposit, transfer and/or roll over into) by Jan. 31, 2014 are eligible for $75 to $1,000 in bonuses based on rollover size:

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If you’ve been shopping at Amazon.com for many years like I have, a fun activity is to look at your order history which it appears they keep indefinitely. I have purchases dating as far back as 1999, with many questionable ones sold off long ago on eBay including Palm PDAs, Minidisc players, and those multichannel walkie-talkies that were so popular for a while. However, other items I still have and will hopefully get many more years of use out of them. Again, these aren’t all my best purchases ever, just five examples I bought from Amazon.

KitchenAid Artisan 5-Quart Stand Mixer
This was bought shortly after we got married, and we’ve been using it regularly without any issues for nearly 10 years. We use it to beat eggs and knead dough for pizza, pasta, cookies, and bread. Cooking at home saves us lots of money, so even though it was expensive upfront, the added convenience has definitely been worth it already.

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How time flies. Almost exactly 5 years ago on November 21st, 2008, I was sitting alone in yet another hotel on a business trip in a city that I can’t even remember. CNN was on TV as I wrote the following in a blog post with the title S&P 500 at 750:

While the present looks bleak, the potential for future returns is looking brighter and brighter for long-term investors. The opposite was true a few years ago. If you’re young and still putting money away, this is a good thing! (Although adequate emergency funds should be your first goal.)

Here are selected comments on that post that I admit gave me some doubt:

However, EPS estimates, and therefore valuations, are ridiculously high.

Putting money into a market that represents the old model right now seems like pure folly.

This bear market will last 3-12 years!

I think it’s funny that many of you are down 50% and think that you will break even in a few years, or justify by saying “I’m for the long term”. […] Also, most of the dividends being advertised are based on fantasy (again), just like the EPS, because companies will be cutting them a lot to survive. So no, the S&P isn’t cheap to buy and buy-and-hold is really dead.

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Time for my annual Black Friday Buzzkill calculator! 😉 Can you hear that sound? Sleigh bells a-jingling? Carol singers? No, it’s credit cards a-swiping as part of what is now officially BUY BUY BUY season.

Here’s a mental trick that I use to temper my “self-gifting” urges. We know that every dollar saved now will be worth much more in the future. I made this calculator to help visualize this fact and push me to forgo short-term (temporary) pleasure for long-term gain.

Assuming a 3% inflation rate, the inflation-adjusted TrueCost™ of your impulse buy in years is:

$600 for a cashmere sweater? $7,000 Flatscreen TV? Ouch. This is not to say the occasional splurge is never worth it. (I do like me a steaming hot Peppermint Latte.) Perhaps it is. But I hope that this calculator can provide a little perspective while you are barraged by retailers to buy stuff you really don’t need. Who cares if you get 30% off when it’s so expensive?

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I’d never heard of Circle Financial or Ann Kaplan before reading this Businessweek interview, but I found myself bookmarking it for later as she gives a lot of unexpected advice that you usually don’t hear from a financial advisor. For example, let’s take “What’s the biggest financial mistake people make?“. I would say that the majority of advisors would focus on some part of investing as that is how they justify their fees. Something like “they should manage risk better, like I do with my smart-alpha-low-beta asset allocation system”. Instead, Kaplan’s response focuses on spending and priorities (emphasis mine):

The biggest mistake isn’t bad investment choices, it’s overspending. Most people are very surprised when they analyze their spending to discover that a lot of it doesn’t reflect their priorities. Maybe they’re eating out a lot when their priority is travel. Most can cut one-third of their budget by eliminating things they don’t really need, whether that’s buying jewelry or theater tickets. The goal of thinking about this isn’t to encourage you to necessarily cut back but to understand that you can. That helps eliminate fear.

“When we study what diminishes wealth, down markets and manager selection are not key figures,” says Kaplan. Instead, it is lack of diversification, overspending and borrowing too much. Build an effective checklist for your road to a healthy portfolio that includes planning, diversifying, monitoring investments, securing tax efficiencies and arranging for appropriate wealth transfer. “All these factors have one thing in common,” says Kaplan. “They are all things we can control.”

Even though she is a former Goldman Sachs partner (which at least to me suggests skill at ruthless profit-seeking), she focuses on the personal/social/behavioral aspect of financial advising and is known for exchanging advice in a group environment:

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Barclaycard recently started a “Barclaycard Travel Community” at BarclayCardTravel.com. Although it’s obviously another “social media” attempt to promote their new Barclaycard Arrival Plus World Elite MasterCard (actually a pretty good travel card with 2% rewards), you do earn “Participation Miles” for sharing your travel stories and tips:

Completing a profile will earn each Member 500 miles; a profile is considered complete when the following information is added: 1) the City and State in which the member lives 2) At least one travel interest is selected 3) at least one travel companion is selected 4) at least 1 travel style is selected 5) at least 5 cities are added to the “My travels” map

Members earn 200 miles for each travel story that is posted.

Every time the story that is authored by a member is kudoed by another member, the member will receive 10 miles.

The points earned directly transfer over the miles balance on your Arrival World card (500 = $5 travel credit, or non-cardmembers can get a $25 Amazon.com gift code each time they accumulate 2,500 miles).
Here is how to link up your Barclaycard Arrival card taken from member Emeritus:

1. Login via Barclaycardus.com
2. On the right side, look for “Earn More Miles” banner and click.
3. At the bottom of the registration page there’s a link “Already a Travel Community member? Link your account today.” Click that and submit.

I got the initial 500 miles pretty easily (miles post a day later), and $2 worth of miles for each post isn’t too bad if you like sharing (and maybe have some old stuff on your personal blog or something). I gave out some kudos as well – some of the stories are good but some are pretty pointless.

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Speaking of holding municipal bonds, I’ve been catching up on the troubles in Detroit and Puerto Rico. Last month, there was a flurry of articles warning about mutual funds with high exposure to Puerto Rico bonds, as they were yielding over 9% and trading at 60 cents on the dollar. Most junk corporate bonds don’t yield that much! Yet, they still clung to investment-grade status from the major ratings agencies because if they went any lower, the bonds would crash as many mutual funds would be then forced by their mandates to sell the bonds. Don’t you love ratings agencies?

For example, the $34 billion Vanguard Intermediate Term Tax Exempt fund [VWITX], the biggest muni bond fund, lost more than 5 percent from May through August. And the largest exchange-traded tax-exempt fund, the $3 billion iShares National A.M.T.-Free Muni Bond fund [MUB], lost 8.3 percent in the same period. […]

In late August, it was Puerto Rico’s turn to roil the market. A Barron’s article detailed the territory’s high debt load and an economy that wasn’t producing enough revenue to easily cover that debt. The S.& P. Puerto Rico municipal bond index fell 10 percent over the next two weeks before the bleeding stopped. Still, the index was down 16.4 percent in the first nine months of the year.

As of 11/19/2013, Morningstar reports the trailing YTD total return of MUB was -2.97% and VWITX was -1.43%. From Reuters:

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Same offer, but link works again. Here’s a free 39-week subscription to the Wall Street Journal. New subscribers only. Not a trial, no credit card required. Just fill out the first page, hit “Click Here”, and that’s it. Use a spam e-mail if you want. No need to sign up for anything else.

I’ve passed on this offer in the past, but these days it seems that most good WSJ articles are behind their paywall unless you read it on the first day of publication (even with the Google News trick). I don’t think I’ll read the physical paper all the way through, but the free online access will be appreciated. Readers have already reported receiving their issues from signing up in October, but quantities are limited.

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I would characterize my personal portfolio as 85% passive, 15% active, and 100% low-cost. Why is part of my portfolio managed by people trying to generate “alpha”? Aren’t I supposed to say that index funds are always better? Author and money manager Rick Ferri has a good post about When Active Funds Makes Sense, even he is a well-known index fund advocate.

Here are a few circumstances when I consider an actively managed fund over an index-tracking product:

The absence of a diversified low-cost index fund or ETF that tracks the asset class.

An active fund is lower in cost than an equally diversified index fund.

An active fund has greater diversification than an index product, even if the fee is slightly more.

The unique risk I am trying to capture is better suited to active management than in an index-tracking product.

He then discusses in detail a few categories that satisfy these conditions: municipal bonds, high-yield corporate bonds, and value stock strategies. I was particularly interested in the muni bonds part:

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The editorial content on this site is not provided by the companies whose products are featured. Any opinions, analyses, reviews or evaluations provided here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the Advertiser.